Stora Enso’s HY1 profits halved

Stora Enso plans additional cost cutting actions and temporary production curtailments in the Printing and Reading and Building and Living business segments in the second half of 2012. Commercial downtime said to support prices and cash flow as both markets continue to weaken due to structural and economic issues.

Stora Enso reported a significant deterioration in profits in the first half 2012 amid weak market conditions and European economic crisis. The company’s net profit for the period halved to €144m. Operating profit was 32.7% down to €277m against the same period last year. Net sales decreased by €150m or 2.7% year-on year to €5,394m.

According to Stora Enso, weaker performance in the period under review was mainly due to lower prices in local currencies and lower delivery volumes. In addition, exchange rates had a negative net impact on operational EBIT, after hedges. “Fixed and variable costs remained unchanged,” Stora Enso explained commenting on the results for the first half 2012.

Despite a slight 1.4% increase in paper deliveries in the first half of 2012, net sales in the Printing and Reading segment decreased by 1.5% to €2,418m, while operational EBIT was 30.7% down year-on year to €109m. Operational EBIT in the Renewable Packaging segment saw a 31.1% drop year-on-year to €134m. Consumer board deliveries were down 2.6 % to 1.578 million t while corrugated packaging deliveries went up by 11% to 543 million m² in the first six months of the year. Net sales were €1,61bn and thus 1.9% less than in the first half of 2011.

Business results of the Biomaterials segment also deteriorated in the first half of 2012. Net sales dipped by 12.9% to €488m and operational EBIT stood at €22m, showing a 74.1% drop against the same period of 2011. Pulp deliveries went down by 2.9% year-on-year to 898,000 t, the company reported.

Stora Enso unveiled its plans to meet lower demand and manage pricing quality in the second half of the year. The company announced additional cost reductions and temporary production curtailments in the Printing and Reading and Building and Living business segments for the coming six months, as both markets continue to weaken due to structural and cyclical issues in Europe. Production curtailments have already started in the second quarter and will be intensified in the third quarter, Stora Enso said.